Tesco has accepted a US$10.6 billion bid for its Asian businesses from a consortium of companies controlled by Thai billionaire Dhanin Chearavanont.
The deal, which remains subject to regulatory approval and Tesco Group shareholder approval, will be completed in the second half of this year.
The price represents an earnings multiple of 12.5 times and marks a significant premium on analysts’ estimates of the business being worth about $9 billion.
The CP Group entities which will buy the assets – Tesco Lotus in Thailand and a joint venture with Sime Darby in Malaysia – are CP Retail Development Company, Charoen Pokphand Holding Co, CP All Public and CP Merchandising Co. CP All runs the vast network of 7-Eleven stores across Thailand.
Assuming shareholder approval for the deal, Tesco plans to return around £5 billion (US$6.59 billion) to shareholders via a special dividend.
“This sale releases material value and allows us to further simplify and focus the business, as well as to return significant value to shareholders,” said outgoing Tesco CEO Dave Lewis.
In a statement, Tesco said the disposal will “further de-risk the Tesco business by reducing indebtedness through a £2.5 billion pension contribution (in the UK) that, along with other measures, is expected to eliminate the current funding deficit and significantly reduce the prospect of having to make further pension deficit contributions in the future”.
The deal announced today effectively sees CP Group buy back the Lotus operations in Thailand, which it sold to Tesco in 1997 to raise cash during the Asian Financial Crisis.
CP also owns the Sam Makro grocery warehouse business with 130 stores, along with more than 11,000 7-Eleven stores.
In winning the Tesco business, CP Group beat rival local bidders Central Group and TCC Group. The decision was reached quickly by the Tesco board given final binding bids closed on February 29.